NAFTA uncertainty threatens Mexico economy

WASHINGTON: Uncertainty over the NAFTA trade agreement poses a risk to economic growth in Mexico, the International Monetary Fund said Monday as US, Mexican and Canadian negotiators geared up for new talks.

The IMF said in a report that Latin America’s second-largest economy was weathering a difficult international environment relatively well, but could see growth take a hit because of US President Donald Trump’s moves to overhaul or scrap the North American Free Trade Agreement.

“Prolonged and heightened uncertainty regarding the pace and outcome of the negotiations” poses a major risk, the IMF said in a so-called Article IV report after an annual fact-finding visit to Mexico.

The report comes as Mexico City prepares to host a fifth round of talks from November 17 to 21 between the three NAFTA countries.

The 1994 trade deal has helped turn Mexico into a major exporter by giving it duty-free access to the United States, the destination for about 80 percent of its exports.

But talks on updating it have stumbled over several controversial issues, and the last round ended with all three sides trading blame and extending the negotiations into 2018.

Trump has called NAFTA the worst trade deal ever signed by the United States, accusing it of shipping American manufacturing jobs south of the border.

His administration has made some hard-to-swallow demands aimed at reducing the United States’ more than $60 billion trade deficit with Mexico, including tightening the “rules of origin” to require a certain percentage of vehicles be made in the US to qualify as duty-free.

The IMF predicted the Mexican economy would grow 2.1 percent this year and 1.9 percent in 2018, sticking to its most recent forecast from early October.

But it said Mexico also faces risks caused by weak US growth and political uncertainty in presidential elections next year. Leftist populist Andres Manuel Lopez Obrador — a fiery critic of both Trump and the NAFTA negotiations — currently holds the lead in opinion polls.